Rethinking the national car policy

Rethinking the national car policy

Japan's decision to take Indonesia's controversial policy on
the national car, the Timor, to the World Trade Organization
(WTO) panel today has concerned many parties. The Jakarta Post
talks about the case to economist Mari Pangestu from the Center
for Strategic and International Studies.

Question: Now that Japan has finally decided to take the case
to WTO what do you expect to happen?

Answer: We will have six to nine months before a verdict.
Nevertheless, if the case has reached the panel, neither party in
the dispute will be allowed to take part in the process until a
decision is made.

The panel, which consists of a minimum of three independent
members, is given a maximum of nine months to reach a decision.
Yet, if the case is very clear, they may need only a month to
reach a verdict. The time needed by the panel also depends on how
the panel works.

The panel's task is to evaluate arguments of both parties and
pass judgment.

Q: Do they base their work only on papers (written arguments)?

A: They also use their own judgment, based on facts, precedents
and the legal aspect of WTO regulations. They have to make their
own investigations.

Q: Some believe that Japan will drop the case because of
Indonesia's fierce reaction.

A: There is still time -- until today -- for Japan to do so, but
I have no idea about the possibility. Let's say the case is still
in the consultative stage, and Minister of Industry and Trade
Tunky Ariwibowo is successful in last minute negotiations with
Japan ... who knows?

Q: About the case itself, what do you think of it?

A: I'm not a legal expert on General Agreement on Tariffs and
Trade, but I think, based on the existing facts, Indonesia's
position in this case is weak. Indonesia is breaking the basic
principle of nondiscrimination and the reasons for breaking it
are not good enough.

There are indeed certain circumstances -- such as infant
industries and temporary subsidy arguments -- under which
particular countries may be allowed to skip the nondiscriminative
principle.

The question is: Will the arguments be acceptable to the
panel? Can they be accepted as strong-enough arguments for
Indonesia to apply discriminative policies?

Q: What do you think of those arguments?

A: It will be difficult for Indonesia to use the infant industry
argument. There are only a few countries which were successful in
using such an argument. Besides, most countries have been
avoiding using that (argument) because it is difficult to prove.

Q: Some top government officials have kept saying that the
national car policy will not incur financial losses to Japan.
What's your opinion?

A: I think it's not merely a case of causing financial losses.
How we judge the case cannot be explained just by relating it to
the country's loss or profit. It's more about principle.

If we look at it as a case which creates a precedent -- and
not relating it to any other aspects and just for the sake of
future policies -- the policy is primarily breaking a basic
principle. Thus, if the policy goes on, other countries will be
able to apply the same policy, not just in the same business
sector but in other sectors as well.

In other words, if we analyze it as something that may affect
the international trading system as well as the broken principle,
we have to stand for the nondiscriminative principle.

The official Japanese statement -- that the case was a matter
of a principle-- is indeed interesting. Regardless of it being
the truth or not, and as an economist who knows what
repercussions the policy may have on the international trading
system, I think it's worthwhile to evaluate whether the policy
breaks the trading principle.

If we want to be a member of an international trading system,
that is the consequence.

Q: Are you saying that if we let the policy go, we'll create a
bad precedent?

A: Yes, we could. Let's consider this a test to the system. We
will probably win. Who knows? If we win, we will then be able to
know why we did. Is it because we did not break the principle, or
is it because there is something wrong with the principle?

That's why I prefer to analyze it from the effect of the
policy on the international trading system rather than from a
loss-or-profit point of view.

Q: About the policy itself, how do you see it?

A: It depends on what we expect from the policy. If we expect to
be able to make our own car easier and more efficiently, probably
we need to reevaluate and see if there is some other way to reach
that goal. Or, if the objective of applying the policy is to give
the people a cheaper type of car, we also need to rethink and see
if there is some other way to gain that objective. (swa)